The price of Gamma Corp. stock will be either $62 or $86 at the end of the year. Call options are available with one year to expiration. T bills currently yield 4 percent.

a. suppose the current price of the companys stock is $70. What is the value of the call option if the exercise price is $65 per share? (3 points)

b. Suppose the exercise price is $75 in part (a). What is the value of the call option now? (3 points)